Sales at global drinks giant Diageo lost their sparkle during the three months to the end of September as a slowdown in Asia and a continuing decline in Europe held back performance.
Overall net sales were flat on the previous year, a trading statement revealed, as the firm behind a host of major brands including Guinness, Smirnoff and Johnnie Walker ended its distribution agreement for Jose Cuervo tequila.
But the top line figures masked the effect of a “substantial” fall in sales of white spirits in China, following the imposition of government anti-consumption measures and currency issues in the rest of the Asia Pacific region.
Diageo said the problems which did not halt the growth of its super and ultra-premium Scotch whisky brands in China held the market’s performance back to a 0.6% rise in sales, despite improved performance in India, following the £342 million acquisition of an additional 15% direct interest in United Spirits during the period, and Korea.
The group’s North American business was the star performer, delivering “good” net sales growth of 5.1%. Spirits were the key to that success, with strong performances from the Croc, Crown Royal and Ketel One brands contributing to an improved sales mix.
Africa also fared well, with organic sales climbing 5% and things expected to get even better in the coming months.
But Eastern Europe and Turkey saw a decline against a tough comparator this time last year and amid revenue pressure in Russia.
Sales rose almost 11% in Latin America and the Caribbean, but Diageo said this marked some “moderation” on previous trends.
The continuation of the improved but still declining sales trend observed in Western Europe during the previous quarter saw net revenues there dip by 1.1% against the summer of last year.
Chief executive Ivan Menezes said the firm, which already employs more than 1,000 people in Fife and is in the throes of investing hundreds of millions of pounds in a new warehousing facility there, had performed well “given weakness in some markets”.
“The strength of our biggest business, US spirits, underpinned our performance,” he said, while also predicting a low single-digit decline for the full-year in home markets in Western Europe.
“While there are headwinds in some emerging markets, including the impact of the government policies in China, there are also markets in which we continue to deliver robust growth, and Diageo’s strength is the diversity of our geographic breadth and broad category reach,” he added.
“We continue to make this strong business stronger.”
The group reported revenue growth of around 5%, to more than £11.4bn, for the 12 months to the end of June.